(a) Interest rates for one year in Cyprus are 7%, while corresponding nominal interest rates in the U.S. are 5%. The spot rate for the Cyprus pound (CYP) is $1.50. According to the international Fisher effect (IFE), what is the exchange rate for the CYP predicted to be in one year?

(b) The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 1.3%. The current exchange rate for the Japanese yen () is $0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, what is the new exchange rate for the yen predicted to be?

(c) Assume that interest rate parity holds. The interest rate on euros is 8%. The interest rate in the U.S. is 5%. What should we expect the difference between the spot and forward rates to be? Remember that, directionality, that is, positive or negative sign matters.